this R&D effort include the Partnership for a New Generation of Vehicles (PNGV), a government-industry effort to develop affordable cars that meet all applicable safety and environmental standards and get up to three times the fuel efficiency of today's cars. In 1999, the President's budget for PNGV is $277 million, up from $227 million appropriated for 1998. Our PNGV effort is clearly paying off-the developments about higher mileage cars announced by the Big Three last month were assisted by research supported under PNGV. It is exciting to see our U.S. auto makers already planning for the cars of the future, not as pipe dreams but as achievable greenhouse gas friendly products.

As General Motors Chair and CEO John F. Smith said recently in announcing GM's plans to step up research spending and focus on bringing new products to market, “No car company will be able to thrive in the 21st century if it relies solely on internal combustion engines." And as William C. Ford, Jr., Chair of Ford's Finance Committee, also said in announcing that Ford will join with Daimler-Benz of Germany in developing cars with fuel-cell engines, "There's a compelling business case to be made."

Similar government-industry efforts are proposed to develop cleaner, more efficient diesel engines for both light trucks and heavy trucks. The R&D effort also includes expanded research partnerships for key renewable technologies such as wind, photovoltaics, geothermal, biomass, and hydropower to accelerate price reductions and improve performance. The President's 1999 budget proposes a $100 million increase in appropriations for solar and renewable energy R&D—a 37 percent increase over 1998.

We hope that the Congress will view the President's initiative favorably and appropriate the funds and enact the tax incentives that he has requested. We look forward to working with you to put the President's proposals into action.

The President and his Administration are committed to working with you in the Congress, both to realize the potential of the Climate Change Technology Initiative and to craft the ongoing U.S. approach to climate change. The United States has the power to lead the global effort, and Congress holds the key. What is done or not done today will determine the kind of world we will leave to future generations and the conditions of life they will face.

Sustained Effort Required

Mr. Chairman, I have mentioned that Kyoto produced a framework for future action, and I have listed a number of the steps that await us.

Coming to grips with the threat of global warming is no small task. We must tackle it in a vigorous, sober and determined manner, understanding that it represents a challenge but also an opportunity. And as we have always done in the face of global challenge, we must assume the responsibilities of American leadership. Thank you.

Responses to Questions Submitted by Chairman Helms

Question. Please provide the official U.S. global greenhouse gas inventory used by negotiators in Kyoto, on a country-by-country specific basis, for the six greenhouse gases listed in Annex A of the Kyoto Protocol.

Answer. There was no official inventory of greenhouse gases for all countries used in Kyoto. The U.S. 1997 national communication "Climate Action Report" to the Framework Convention on Climate Change contains inventory figures used for the U.S. (Table 3-1). For other countries, there were a number of sources we drew upon for national totals, including individual countries' national communications, information from the U.S. Country Studies Program, and International Energy Agency analyses of carbon dioxide emissions derived from fuel use.

Question. Please provide the 1990 baseline and projections at least through 2030 for carbon dioxide, methane, and nitrous oxide.

Answer. For the U.S., carbon dioxide, methane, and nitrous oxide emissions through 2020 are reported in the 1997 U.S. national communication "Climate Action Report" to the Framework Convention on Climate Change (Table 3-1), which we have included as an attachment to these answers. Estimates beyond 2020 are not reported in the national communication, although IPCC long-term scenarios provide a set of alternative projections beyond 2020. For other countries, there were a number of sources we drew upon for national totals, including individual countries' national communications, information from the U.S. Country Studies Program, and

analysis from the International Energy Agency and the Energy Information Administration.

Question. Please provide the 1995 baseline and projections at least through 2030 for hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride.

Answer. For the U.S., hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride emissions through 2020 are reported in the 1997 U.S. national communication "Climate Action Report" to the Framework Convention on Climate Change (Table 3-1), which we have included as an attachment to these answers. Estimates beyond 2020 are not reported in the national communication, although IPCC longterm scenarios provide a set of alternative projections beyond 2020. For other countries, there were a number of sources we drew upon for national totals, including individual countries' national communications, information from the U.S. Country Studies Program, and analysis from the International Energy Agency and the Energy Information Administration.

Question. Please provide the assumptions, data and calculation methodology that support the Administration's assertion that the impact of carbon sinks on the U.S. greenhouse gas reduction commitment will reduce the actual reduction to 2 or 3 percent below 1990 levels, rather than 7 percent.

Answer. The Administration's proposal for reducing greenhouse gas emissions to 1990 levels between 2008-2012 included all sources and sinks, in both the baseline and the commitment period. Subsequent changes in baseline measurement and methodology explain the Administration's assertion that "the 7 percent target represents at most a 3 percent real reduction below the President's initial proposal of reducing greenhouse gases to 1990 levels by 2008-2012."

First, at the initiative of the U.S., the Protocol allows parties to apply their 1995 baselines for emissions of hydrofluorocarbons, perfluorocarbons, and sulfur hexafluoride. This change accounts for about 1 percent of the difference in stringency (see the 1997 U.S. national communication, "Climate Action Report," for data on these three gases). Second, the Protocol does not include sinks in the baseline though it does include afforestation, reforestation and deforestation in later years. Taken together, these changes in baseline measurement and methodology account for about 4 percent of the difference in stringency, leaving roughly a 3 percent real reduction below the President's original proposal.

Question. The Kyoto Protocol establishes a Clean Development Mechanism. What staffing and administrative costs do you anticipate will be required to establish and run this "Mechanism"?

Answer. The Clean Development Mechanism (CDM) provides a means through which industrialized and developing countries can establish partnerships to cut emissions in the developing world, to the benefit of both parties. The intent is to have the CDM operate through existing institutions, not to create new ones. The CDM begins with private sector investments in developing countries. We anticipate that there may be minor administrative costs associated with using the mechanism. Any transaction fee collected would be much like the commission collected by a stockbroker when buying or selling stock. Similar fees exist in the highly successful SO2 permit trading system implemented to control acid rain in the U.S. As with other markets, participants in the CDM will have a built-in incentive to ensure that administrative costs are kept to a minimum.

Question. What fee do you anticipate the U.N. will charge companies for investing in developing countries through this "Mechanism"?

Answer. It has not been determined that the United Nations would play any role whatsoever in the Clean Development Mechanism (CDM). The CDM allows companies to invest in projects or to purchase certified emissions reductions outright. A small share of the proceeds will go to cover administrative expenses and help countries that are particularly vulnerable meet the costs of adaptation to climate change. We do not anticipate that the United Nations pre se will receive any funds from the CDM, unless a UN agency were to be selected as an operating entity.

Question. What criteria do you anticipate this "Mechanism" will use to approve or reject investments?

Answer. Emissions reductions obtained through the CDM must be verified as being real and additional, above reductions that would otherwise have occurred. The exact rules and guidelines for the acceptance, monitoring and verification of CDM projects will be worked out with the other Parties over the next year or so. The U.S. will push for a structure which ensures that reductions are real and additional,

while allowing as much flexibility as possible for participants in CDM project activities.

Question. The Energy Information Administration (EIA) has projected that carbon emissions in the United States will increase from 1990 emissions levels by 34 percent by the year 2010. The Kyoto Protocol would require the United States to reduce these emissions to 7 percent below 1990 levels by 2010. In addition to your assertions of increased energy efficiency, and international emissions trading, please detail how the Administration intends to reach these enormous commitments without constraining U.S. economic growth?

Answer. There are several ways in which U.S. energy efficiency will be improved, and costs will be reduced without constraining U.S. economic growth. These are discussed in detail in the attached testimony of Dr. Janet Yellen, Chair of the Council of Economic Advisors, on March 4, before the House Commerce Committee, and then before the Senate Agriculture Committee. These include the following: (1) international emissions trading among Annex I countries; (2) innovation and technology, spurred by the President's tax cut and R&D package; (3) in addition to increased energy efficiency and international emissions trading among Annex I countries, substantial cost reductions are possible if developing countries commit to quantitative targets enabling them also to participate in international emissions trading arrangements. Significant benefits should also accrue from the Clean Development Mechanism. A number of additional factors can also play a role in enabling the United States to meet its target without constraining economic grow? These include the use of carbon absorbing sinks to offset greenhouse gas emissions and the flexibility allowed by the Kyoto Protocol to meet the U.S. target through reductions in all six greenhouse gases and not just CO2 alone. The President has also indicated his support for legislation to unleash competition in the electricity industry. Such legislation could lower electricity prices significantly for American consumers and also reduce greenhouse gas emissions.

Question. Regarding amendments to the Kyoto Protocol, while the Administration is calling the Kyoto protocol a "work in progress," isn't it true that the Kyoto Protocol is a final document that must be considered by all nations as is? Can the Protocol be amended or changed in any way before it enters into force? If so, how would this be done?

Answer. The President has made clear that the Protocol is a work in progress and that without more developing country involvement, he will not submit it to the Senate for advise and consent to ratification. Accordingly, we intend to take steps to ensure that our objectives are met, including meaningful participation by key developing countries. One method for achieving such progress is for the Conference of the Parties to adopt a further instrument, such as a supplementary protocol, which would be an integral part of the Kyoto Protocol and would enter into force at the same time as the Protocol. Further review and consultations with other governments would be necessary to determine what form and content of additional steps and documents would be feasible and desirable.

Question. Procedurally, how does the Administration intend to act on any proposals in Buenos Aires? For example, how would an emissions trading regime be considered and adopted? What about enforcement and compliance rules? What about new scheduled emissions reduction commitments by developing countries in the same compliance period as developed countries?

Answer. Most of the decisions called for in the Protocol must be made by the Protocol Parties, which can only happen once the Protocol has entered into force. With respect to such decisions, the meeting of the Convention's Conference of the Parties in Buenos Aires will be preparing such decisions, rather than making them. However, with respect to emissions trading rules, the Protocol assigns the taking of decisions to the Conference of the Parties; thus, decisions related to emissions trading could be taken at Buenos Aires (although they would become effective only upon entry into force of the Protocol).

Question. Please answer the following questions regarding the creation and implementation of a domestic emissions trading program:

Is the Administration considering the creation and implementation of a domestic emissions trading program?

Answer. The Administration supports emissions trading as one element in the implementation of a binding target once the Kyoto Protocol is ratified and enters into force. The Administration's approach to domestic emissions trading will, of course, reflect our concern for the Senate's constitutional role in advising and consenting to international treaties.

Question. Does the Administration believe that a domestic emissions trading program could be implemented absent legislation? Would legislation be required for any aspect of a domestic emission trading program under consideration? If you do not believe that legislation is required, under what statutory authority, specifically, would the Administration intend to proceed? What would be the basis for such an interpretation?

Answer. The Administration believes that new domestic legislation would be required to establish a comprehensive greenhouse gas emissions trading regime in order to meet our Kyoto Protocol commitments and looks forward to working with the appropriate committees in Congress shaping legislation at the appropriate time. Question. Would a domestic emissions trading program be implemented without ratification of the Kyoto Protocol? If so, on what basis? How would such a program relate to the proposed, yet thus far undefined, international emissions trading regime?

Answer. The Kyoto Protocol does not limit national programs to mitigate climate change such as a domestic emissions trading initiative. The President has stated his support for a "cap and trade" system that would come at the end of a three-stage approach and not become effective before 2008. This strategy allows ample time for Senate advice and consent to ratification. In this process, we anticipate that any domestic emissions trading program would be crafted to facilitate participation in international emissions trading.

Question. Would a domestic emissions trading program be voluntary? If so, what incentives would be offered to induce companies and other entities to participate? Who would run such a program? Under what authority?

Answer. Under the acid rain program, firms are not required to participate in emissions trading, but may do so, on a voluntary basis, as a means of reducing their costs of compliance. We anticipate that any emissions trading for greenhouse gas would be designed in a similar manner. Operational aspects of an emissions trading program, including the administrative structure, presumably would be determined through authorizing legislation.

Question. By its very nature, an emissions trading program would require an emissions "cap" that would make an emissions unit tradable commodity. Would adherence to the cap be voluntary or mandatory? How would a cap be established? Has any Administration official or entity examined in any way whether a mandatory cap could be placed on carbon emissions? If so, would it be the Administration's view that legislation would be required to proceed? If not, under what authority would the Administration act?

Answer. Both theoretical models and previous experience suggest that a mandatory cap is required for emissions trading. Specific design issues would be worked out in the context of legislation which the Administration believes would be required for implementing any comprehensive emissions trading regime for greenhouse gases. Our goals would include designing a flexible trading system, in close consultation with Congress, the private sector and interested others.

Question. Could international emissions trading proceed today on the basis of the Kyoto Protocol? If so, how? If not, what would the Administration deem necessary for an international emissions trading program to proceed?

Answer. The concept of emissions trading is enshrined in Article 17 of the Protocol and our legal reading of the text leads us to believe that emissions trading can proceed. However, details to improve comparability and transparency and to guarantee flexibility and credibility remain to be worked out by the Parties.

Question. If the United States, or any other nation, sought to amend the Kyoto Protocol, wouldn't it need to follow the amendment process to the Protocol? To participate in that process, wouldn't the United States, or any other nation, have to be a party to the Protocol? If this is the case, how does the Administration intend to change anything that is now included in the Protocol or add anything to the Protocol-which is deemed a work in progress-until after U.S. ratification? If it is your belief that the United States does not have to be a party to the Protocol to amend the agreement, how could this be done?

Answer. After entry into force of the Protocol, Parties seeking to amend the Protocol would have to follow the amendment procedure set forth in Article 20. Participation in that process would require being a Party to the Protocol. As noted above, the considerations for adding elements to the Protocol prior to entry into force are different, and we are exploring the modalities for doing so.

Question. Would the Administration consider submitting the Kyoto Protocol to the Senate for its advice and consent before formal adoption of amendments to the Protocol? If not, is it the Administration's intention to forgo submitting a global climate treaty to the Senate? If so, how specifically would the Administration go about making the Protocol acceptable to the American people?

Answer. As noted above, we are exploring possible modalities for adding new elements to those contained in the Kyoto Protocol. The President has said that he will submit the Protocol to the Senate only after meaningful participation of key developing countries has been achieved.

Question. Is it the intention of the Administration to seek to negotiate a new Protocol and send both Protocols together to the Senate for advice and consent? If so, what would a new Protocol look like specifically? Have any other countries expressed an interest in such an approach? If so, which countries?

Answer. At this time, we do not have a proposal for a new instrument.

Responses to Questions Submitted by Senator Hagel

Question 1. When the Congressional delegation met with Vice President Gore in Kyoto, I asked the Vice President exactly what he meant when he called on you and the rest of the U.S. delegation to show more flexibility. The Vice President said that he would defer that question to you, but you were not at that meeting. Can you tell us exactly what instruction you received from the Vice President and what he meant when he instructed you to be more flexible in the negotiations?

Answer. The Vice President's visit advanced the negotiations by prompting all Parties to renew their efforts to find common ground. Earlier in the meeting, the U.S. signaled its openness to consider differentiated targets for developed countries. This move helped bring on board a number of critical countries and demonstrated that we were serious about obtaining a successful outcome in Kyoto. It would be inappropriate to discuss internal deliberations that led to modification of the U.S. position, but the Vice President's call for greater flexibility furthered the trust building process among our negotiating partners. We were able to convince them to focus on realistic targets and to include all six major greenhouse gases and carbon "sinks"elements which they had previously opposed. In the end, the U.S. level of a 7% reduction in emissions actually represents at most a 3% real reduction below the President's initial proposal for stabilization of emissions at 1990 levels by 20082012 when different methods of accounting for the sinks and all six gases are factored in.

Question 2. Please define for me: “meaningful participation from key developing countries?"

Answer. Climate change is a global problem that requires a global solution. Current projections show that developing country emissions will surpass those from industrialized countries by 2030 or sooner. The problem of climate change cannot be solved unless developing countries take measures themselves to limit greenhouse gas emissions.

In determining what developing countries ought to do, we should be aware that the circumstances of developing countries vary widely, along a kind of continuum. Some today are very poor; their greenhouse gas emissions are negligible and are likely to remain so for the foreseeable future. Others, whose greenhouse gas emissions are not substantial, are relatively well off. Some are poor on a per capita basis, but their greenhouse gas emissions today rival or surpass those of the advanced industrialized nations. Still others have already joined ranks with the industrialized world in the OECD but have not yet fully accepted the added responsibility for protection of the global environment that comes with their new status.

We found in Kyoto that even among the industrialized countries it was necessary to recognize the individual national circumstances faced by those differently situated in order to reach agreement, notwithstanding our common purpose. Similarly, any uniform, inflexible approach to the 'meaningful participation of developing countries' is unlikely to prevail.

The U.S. will be working bilaterally, regionally, and multilaterally in the coming months and years to promote more active efforts by developing countries to limit their emissions. We will concentrate on key developing countries and on approaches that are consistent with the economic growth and development of these countries and with other environmental objectives. We will not submit the Kyoto Protocol to the Senate for advice and consent to ratification until we believe we also have achieved meaningful participation from key players in the developing world.